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Monday, February 01, 2010

J v J: A summary ...and a suggestion

I have been working my way through the mammoth (484 paragraphs plus chronology) judgment of Mr Justice Charles inJ v J [2009] EWHC 2654 (Fam). He begins the judgment by apologising to the reader for its length, which he says "flows from the way in which the factual disputes were prepared and presented and the general points that I have decided to make in that context".

Bear with me...

The FactsThe parties were married in June 1996. There were no children of the marriage, but the wife had a daughter by her first marriage, now aged 15. The parties separated in January 2006 and later that year the wife commenced divorce proceedings. Shortly thereafter the husband issued an application for ancillary relief.

When the case first came on for hearing in March 2009, Mr Justice Charles took the view that it was not then ready for trial on a central dispute of fact, namely that the wife had undisclosed substantial assets or ready access to such assets. Accordingly, he adjourned the hearing and ordered further disclosure in respect of that central dispute. Further, "in an attempt to focus the minds of the parties on basic aspects of the preparation of a case for trial, namely the identification of (a) the issues, (b) the facts that were agreed and (c) the facts that were in dispute, and thus the evidence that was needed to prove them, he directed that each party file a statement setting out, inter alia, the findings of fact that each party will ask the court to make and the facts upon which those findings should be made.

The IssuesHaving outlined the background to the case, Mr Justice Charles then spent considerable time dealing with the evidence (and shortcomings in evidence), in particular that relating to two 'headline issues of fact': the husband's allegation that the wife had, or had access to, substantial wealth, and the wife's allegation that the husband had misrepresented the value of his company, and had failed to disclose that a process was in progress with a view to selling his shares in the company.

The LawMr Justice Charles then spends some 137 paragraphs setting out a pretty thorough summary of the law on ancillary relief, beginning with the 'general starting point', where he found (at paragraph 288) that "the following propositions can now be stated with some certainty":

i) Fairness is the objective.

ii) The distribution of assets between the parties should be effected on a principled and not on an arbitrary basis.

iii) The starting point is the financial position of the parties and s. 25 MCA 1973. This appears for example at paragraph 67 of the judgment of Sir Mark Potter P in Charman v Charman [2007] 1 FLR 1246 (Charman (No 4)) where he says:

“… the starting point of every inquiry in an application of ancillary relief is the financial position of the parties. The inquiry is always in two stages, namely computation and distribution;”

iv) The House of Lords in White v White [2001] AC 596 and Miller v Miller and McFarlane v McFarlane [2006] 2 AC 618 has given guidance as to the approach and principles to be applied in the exercise of the statutory discretion conferred by the MCA 1973.

v) That guidance makes it clear that the court is to have regard to, and apply, the relevant statutory provisions.

vi) In doing so the three main principles that inform the second stage of the enquiry (i.e. distribution), and thus the reasoning to be applied in determining on a principled basis applying the statute what is a fair result, are need (generously interpreted), compensation, and sharing.

vii) The source of assets is relevant.

He found that the compensation principle did not apply in this case, but that the other two principles (needs and sharing) did.

The DecisionMr Justice Charles assessed the wife's needs at £150,000 per annum, which he capitalised into a lump sum of £4.2 million.

As to sharing: "in my view any departure from equality within the sharing principle for good reason in respect of the assets subject to the s. 25 exercise has to be based on (a) pre-acquired or gifted assets and/or (b) the increase in value of the company after separation". On this basis, he found that the sharing principle gave the wife £5.424 million.

He then compared the two outcomes and concluded that a fair result was that the wife should have an award of £5 million.

'General comments for consideration by the profession'After giving his decision, Mr Justice Charles set out some 'general comments for consideration by the profession', in which he invited the profession "carefully to consider individually, and as a specialist group, whether they should review and change their general approach to the preparation and presentation of “big money” cases". His reason for doing so was that in this and three other cases that he had recently dealt with "there were significant flaws in the results of their preparation and presentation". He said:

"At the heart of the flaws I have identified in the cases mentioned is the point that in my view there have been failures to properly identify the issues and, by reference to them, properly to identify (a) the findings the court is being invited to make and the reasons why they are relevant, (b) the facts and matters the court is being asked to find as the basis for those findings and (c) the evidence that is needed to achieve these goals."

To address this, he proposes that where appropriate (i.e. in "big money" cases) the existing ancillary relief procedure be supplemented by "an exchange of documents identifying the building blocks of each side’s case, particularly when there are disputes of fact and, even more so, if allegations of dishonesty are being advanced". This might take place before the FDR, and certainly after a failed FDR.

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